Demand For Gold Loan Spikes

There were a few reasons that led to this sudden increase in the demand for Gold Loan, Let's discuss them below :

Job Losses:

During the pandemic, countless employees were fired from jobs, and even more suffered salary cuts. This led to a major financial crunch in a lot of homes. Especially those homes where there was only one breadwinner and a lot of dependents.

Funding for businesses:

As much as 1,00,000. Small businesses had to shut down because of no funds. Many such small business owners turned to Gold loans to fund this money requirement. 

Spike in Gold Loan prices:

During a crisis, everyone is skeptical about the economy coming back on track. This makes everyone avoid risk and turn towards safe investment. This is why people turn to Gold because Gold is considered a safe investment. It is because it is present in limited quantities, and the money's value is tied to Old. Its value can never turn to zero.

New business establishments:

Moreover, more than 3,75,000 new small businesses were established in the lockdown. The funding to new businesses mostly comes from loans, and due to the availability of Gold in almost every home, Most people took Gold Loans to fund these

Lower Interest Rates:

The lowest interest rate you will find in any loan product is in Gold Loans. The gold loan rate is as low as 9 percent per annum. They give you the flexibility of end-users like personal loans and then charge the lowest interest rate. 

No Processing fees:

The processing fees are the lowest in the case of Gold Loans. It's as low as one percent. Moreover, the processing is so fast these days that the loan amount is transferred as early as an hour.

No foreclosure fees:

Foreclosure means paying back the whole outstanding amount before maturity. A lot of other loan products have these charges but in the case of Gold Loans, there are no such charges.

No income proof requirement:

One of the best things about gold loans is that you don't need any income to avail yourself of a good old loan. You may be a high-earning private employee or a homemaker, you can avail of gold loans. There is no occupational bar to the borrower of a Gold loan. Gold loan's popularity has risen tremendously due to the haven appeal it has and especially the dwindling economy due to lockdown. The above-mentioned reasons were a big kick to the increased demand for gold loans.

Gold loans are also so popular here because due to the religious and cultural significance Gold in India is present in every house. This makes people turn to Gold when they face a financial crunch. Before you go to apply for any loan, you need to check out which fits your needs the best. Check SBI Gold Loan Per Gram and other banks before you apply for any Loan.

There is one more very crucial thing to consider and that is the LTV ratio. LTV stands for Loan to Value. It refers to that portion of your gold's worth that you will get a loan. Banks usually have an ATV ratio more than Non-banking financial corporations. But here a thing to note is the non-banking financial corporations or NBFCs charge higher interest than the banks. This is because by giving more value to your gold as a loan they are taking higher risk than the banks. 

Conclusion:

Due to the reasons mentioned above, the Gold loan demand has drastically increased, but this is not bad news. The bad news would be if you choose a Gold loan without having proper knowledge regarding it and without doing a proper comparison.